From its first day of operations to December 31, 2020, Campbell Corporation provided for uncollectible accounts receivable under the allowance method:

1. Entries for bad debt expense were made monthly based on 2.5% of credit sales.

2. Bad debts that were written off were charged to the Allowance for Doubtful Accounts.

3. Recoveries of bad debts previously written off were credited to the allowance account.

4. No year-end adjustments were made to the allowance account.

The balance in Allowance for Doubtful Accounts was $184,000 at January 1, 2020. During 2020, credit sales totalled $9.4 million, interim entries for bad debt expense were based on 2.5% of credit sales, $95,000 of bad debts were written off, and recoveries of accounts previously written off amounted to $15,000. Campbell upgraded its computer facility in November 2020, and an aging of accounts receivable was prepared for the first time as at December 31, 2020. Campbell?s usual credit terms were net 30 days, and remain unchanged. A summary of the aging analysis follows:

additional receivables totalling $69,000 were written off as at December 31, 2020. The 60% uncollectible estimate therefore only applies to the remaining $81,000 in the category. Finally, beginning with the year ended December 31, 2020, Campbell adopted a new accounting method for estimating the allowance for doubtful accounts: it now uses the amount in the year-end aging analysis of accounts receivable.

Instructions

a. Prepare a schedule that analyzes the changes in Allowance for Doubtful Accounts for the year ended December 31, 2020. Show supporting calculations in good form. (Hint: In calculating the allowance amount at December 31, 2020, subtract the $69,000 write off of receivables.)

b. Prepare the journal entry for the year-end adjustment to the Allowance for Doubtful Accounts balance as at December 31, 2020.

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Balance in Estimated % Uncollectible Classification by Month of Sale November-December 2020 July-October 2020 January-June 2020 Before January 1, 2020 Each Category $1,080,000 8.0% 12.5% 20.0% 60.0% 420,000 150,000 $2,300,000